Lake City is part of the Rochester, Minnesota Metropolitan Statistical Area.

He christened the large body of water Lac de Pleurs after observing his Sioux captors weeping near the lake over the death of a chief's son.

The war party of Isanti Sioux had captured Hennepin and his two companions several miles south along the Mississippi and were camping near the lake on their return north to their Sioux villages near present-day Mille Lacs.

The waters of Lake Pepin are deep enough to allow for a port, and in 1864 the Lake City town supervisors were given special powers by the State Legislature to create a port market for grain.

Soon after, Lake City became noted as a profitable market for grain with the volume of trade in 1866 bringing in a little over a million and a half dollars.

Lake City became incorporated in 1872 and has become widely known for its attractive surroundings and bountiful fishing.

The Sea Wing disaster occurred on July 13, 1890 when a strong squall line overturned the excursion vessel Sea Wing on Lake Pepin near Lake City.

To commemorate this event, Lake City has adopted the nickname "The Birthplace of Water Skiing" and holds an annual town festival, called Water Ski Days.

[5] Water Ski Days typically includes three days of water skiing exhibitions, live music, beer garden, street carnival, sports tournaments, and Grand Parade; it is held annually during the last full-weekend in June.

In 2020 Water Ski Days was slated to be held June 26–28 but was cancelled due to COVID-19.

Amtrak’s Empire Builder, which operates between Seattle/Portland and Chicago, passes through the town on BNSF tracks, but makes no stop.

The nearest station is located in Red Wing, 17 miles (27 km) to the northwest.